Euro Has Too Many Risks To Be Considered A Safe Bet
With the tension between the US and Syria on the rise, investors are pulling their money out of riskier assets and looking for safe havens. The dollar, yen and franc have all gained from recent talk of military strikes in Syria, but the euro has lost ground, trading at $1.32.
The Wall Street Journalreported that the common currency can generally be considered a good option for refuge because of its liquidity and ability to be traded easily in times of crisis. With the region's sovereign debt crisis under control for the moment, the currency is a relatively safe bet.
However, investors are flocking elsewhere with their money as there are still several risks hanging over the common currency's head. Most crucial is the US Federal Reserve's decision to taper its bond buying plan. The European Central Bank will be expected to follow suit even though the region's economy is in a far different place.
On Wednesday, money supply data showed that eurozone business loans fell in July. The figures suggest that the region's recovery will face resistance in the future and could be difficult to sustain. Although economic indicators from the 17 nation bloc have been mostly positive as of late, disappointing data could cast a large shadow of doubt on the region's already fragile recovery.
Political problems are also weighing on confidence in the region, as the Italian Prime Minister Enrico Letta's coalition government holds together only by a thread. After Silvio Berlusconi was charged for tax fraud, he and his center-right People of Freedom party, which shares power with Letta's Democratic Party, threatened to take down the Italian government if Berlusconi was asked to step down.
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